Just entering the automotive industry in 2003, Tesla themselves are facing the challenges of being the new entrants into the market. A high capital is required to begin any business expenditure. Tesla is not expected to become profitable for another 18 months (Taylor, 2011).
There is a relatively low barrier to entry due to the higher demand for environmental friendly vehicles and with other outlets for available technology for lithium-ion batteries, it is a level of playing field where any company can replicate (Shirouzu,2011). This is an external threat that Tesla faces because this technology is easy to imitate by competitors. Power of Buyers
According to the Tesla 10k, they rely on their relationship with Daimler, Toyota and Lotus as they also sell their cars to individual customers. Government incentives give potential customers which is a $7,500 tax credit deduction (Dandekar, 2011). Tesla has 17 dealership locations in North America, and their inventory is very small and limited with consideration the Roaders is the only available vehicle until the Model S is released in 2012 (Tesla Website). The Model S sedan is currently being preordered by customers, proving interest amongst people(Dandekar, 2011).
The Roadster is priced at $109,000 before tax deduction (IT’S A CREDIT) which is extremely expensive for many people not looking to buy a luxury sports car, however the Model S is at $57,400 before deduction which targets to a more median price of a new vehicle (Dandkar, 2011). As a new company, brand loyalty has not fully been established yet therefore by adding value to the vehicle and service to customers will assist in a successful future for Tesla. Power of Supplier
Since Tesla does not manufacture any of their own vehicles, and just the power train battery technology, so they have very high levels of reliability for suppliers (Tesla 10K, 2010). The Roadster is essentially a Lotus chassis and are transported from Hethel England to the final assembly facility in Menlo Park California. Another major supplier is from Panasonic, providing Telsa with the current lithium-ion battery packs. (Tesla 10k,2010).
Without these two major suppliers among 150 others for Tesla, any of their models would not be possible, creating a valuable relationship that however could be easily replicated. Threat of Substitute
Since there are many alternatives for battery powered automobiles and other automobiles in general, there is not a serious threat for substitutions. Mass transportation such as trains, buses, and subways are convenient for both local and distant traveling, serving many people at once with designated stops along the way (Dutch, 2008).
Bicycles compete with automobiles in the environmentally friendly aspect of transportation, but unless it’s a short distance, so usually customers will go car shopping before they go buy a bicycle when considering transportation. Plane tickets are usually purchased for people who find that driving would be more time consuming (The Associated Press, 2009). These substitutes are considerably low threats towards Tesla and should be considered.